WASHINGTON – The Protecting Nonprofits from Catastrophic Cash Flow Strain Act, introduced by U.S. Sens. Tim Scott (R-SC), Sherrod Brown (D-OH), Chuck Grassley (R-IA), and Ron Wyden (D-OR), was signed into law. This legislation will help nonprofits, state and local governments, and federally recognized Tribes remain financially viable during the COVID-19 pandemic. 

Many nonprofits operate as ‘reimbursing employers,’ which means they pay their share of unemployment taxes by reimbursing states for 100 percent of the unemployment benefits collected by their former employees.  Recognizing that reimbursing employers would be unable to cover all of their unemployment costs, the CARES Act allows nonprofits to reimburse only 50 percent to the states while the federal government covered the other 50. 

Guidance issued by the Department of Labor in April, however, requires states to collect 100 percent of unemployment costs from nonprofits up front and reimburse them later, putting a further strain on organizations hit hard by COVID-19. The Senators’ bill would clarify that nonprofits are only required to provide 50 percent in payments up front. The net cost to the employer and the federal government would remain the same, but would free up much needed money to help nonprofits stay afloat.

“As this critical legislation now becomes law, non-profits will have more resources available to continue providing services in our communities without being placed in unnecessary hardship in the midst of the pandemic,” said Sen. Tim Scott. “I look forward to seeing the positive impacts in communities across the country.”

For many nonprofit employers, the requirement to pay 100% of the UI bill before securing relief exacerbates the financial impact of historically high claims triggered by the pandemic, increasing the risk of further layoffs, closures, or substantial reductions in services. This new law will enable states to provide the CARES Act’s 50% emergency relief to reimbursing employers without requiring these nonprofits or other entities to pay their full bill first.

Full text of the bill can be found HERE.